Complaint For Civil Penalties and Other Relief, Including Exhibits AK

73 Pages·2017·11.38 MB·English

by  Federal Trade Commission

Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 1 of 26 Page ID #:1

DAVID C. SHONKA (Acting General Counsel)

1
MIRIAM R. LEDERER (DC Bar No. 983730)

2 [email protected]

Federal Trade Commission

3 600 Pennsylvania Ave., NW, CC-9528

Washington, DC 20580

4
202-326-2975 (Tel); -3197 (Fax)

5
BARBARA CHUN (Local Counsel)

6
CA Bar No. 186907, [email protected]

Federal Trade Commission

7
10990 Wilshire Boulevard, Suite 400

8 Los Angeles, CA 90024

310-824-4343 (Tel); -4380 (Fax)

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Attorneys for Plaintiff Federal Trade Commission
10

11
UNITED STATES DISTRICT COURT

12 CENTRAL DISTRICT OF CALIFORNIA

13
)

14 FEDERAL TRADE COMMISSION, ) Case No. 8:17-cv-01942

)

15 Plaintiff, )
COMPLAINT FOR CIVIL

)

PENALTIES AND OTHER RELIEF
16 v. )
)

17 )

NORM REEVES, INC., also d/b/a
)
18 Norm Reeves Honda Superstore
)
Cerritos, a California corporation; )

19
)

CERRITOS FORD, INC., also d/b/a
)
20 Norm Reeves Ford Superstore
)

Cerritos, Norm Reeves Lincoln, and )

21
)

Norm Reeves Hyundai Superstore, a
)
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California corporation; CERRITOS
)

23 INFINITI, INC., also d/b/a Cerritos )

)

Infiniti, a California corporation;
24 )
COASTAL AUTO SALES, INC., also
)

25 d/b/a Norm Reeves Honda Superstore )

)
Huntington Beach, a California
26 )
corporation; CONANT
)

27 AUTOMOTIVE RESOURCES, LLC, )

)
also d/b/a Conant Auto Retail Group
28 )
Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 2 of 26 Page ID #:2

)
and the CAR Group, a California
1
)
limited liability company; CONANT
)
2
AUTO RETAIL, SAN DIEGO, INC., )
)
3 also d/b/a Toyota San Diego and
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Scion San Diego, a California
)
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corporation; IRVINE AUTO RETAIL )
)
5 I, INC., also d/b/a Norm Reeves
)
Honda Irvine, a California
)
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corporation; IRVINE AUTO RETAIL )
7 II, INC., also d/b/a Norm Reeves )
)
Volkswagen, a California corporation;
8 )
IRVINE AUTO RETAIL III, INC., )
9 )
also d/b/a Norm Reeves Buick GMC,
)
10 a California corporation; PARKWAY )
PREMIUM MOTORCARS, INC., )
11 )
also d/b/a Norm Reeves Acura of
)
12 Mission Viejo, a California )
corporation; PORT CHARLOTTE )
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)
AUTO RETAIL, INC., also d/b/a Port
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14 Charlotte Honda and Port Charlotte )
Volkswagen, a Florida corporation; )
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and WEST COVINA AUTO
)
16
RETAIL, INC., also d/b/a Norm )
17 Reeves Honda Superstore West )
)
Covina, a California corporation,
)
18

)
Defendants.
19 )

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Plaintiff, the Federal Trade Commission (“FTC”), for its Complaint alleges that:
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1. Plaintiff brings this action under Sections 5(l), 16(a), and 19 of the
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Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 45(l), 56(a), and 57b,
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as amended; the Truth In Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667, as
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amended; and its implementing Regulation Z, 12 C.F.R. Part 226, as amended; the
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Consumer Leasing Act (“CLA”), 15 U.S.C. §§1667-1667f, as amended; and its
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implementing Regulation M, 12 C.F.R. Part 213, as amended; to obtain monetary
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 3 of 26 Page ID #:3

1 civil penalties and other relief for Defendants’ violations of a final Commission
2 cease and desist order (“Consent Order”).
3 2. The Defendants are a group of automobile dealers in California and
4 Florida. All of the corporate defendants are majority owned by David Conant or
5 the Conant Family Trust. Defendant Conant Automotive Resources, LLC, also
6 doing business as The Conant Auto Retail Group and the CAR Group (“The CAR
7 Group”), provides management services to the other defendant companies. David
8 Conant is the President or CEO and a director of each of the defendant
9 corporations.
10 3. The Commission’s Consent Order, issued February 20, 2014,
11 expressly requires Defendants: (i) not to make misrepresentations about costs and
12 terms of financing or leasing vehicles; (ii) to clearly and conspicuously disclose
13 any material limitation on obtaining advertised annual percentage rates or other
14 interest rates; (iii) to conform their consumer lease advertisements to CLA and
15 Regulation M; (iv) to conform their closed-end credit advertisements to TILA and
16 Regulation Z; and (v) to maintain records related to representations covered by the
17 final Consent Order, and make those records available to the FTC. Defendants,
18 however, routinely violated these Consent Order provisions.
19 JURISDICTION AND VENUE
20 4. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§
21 1331, 1337(a), 1345, and 1355, and 15 U.S.C. §§ 45(l), 56(a), 57b, and 1607(c).
22 5. Venue is proper in this district under 28 U.S.C. §§ 1391(b)-(d), and
23 1395(a).
24 DEFENDANTS
25 6. Defendant Norm Reeves, Inc. (“Defendant-Respondent” or “Norm
26 Reeves, Inc.”), also doing business as Norm Reeves Honda Superstore Cerritos, is
27 a California corporation. The corporation’s physical retail address is 18500
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 4 of 26 Page ID #:4

1 Studebaker Road, Cerritos, CA 90703. The corporation’s registered address is
2 20322 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The registered
3 agent is Janice L. Dietz. David Conant is President and Director of the
4 corporation. Catherine Conant and Paul Conant are also directors of the
5 corporation. The Conant Family Trust holds 100% of the shares of the
6 corporation. At all times material to this Complaint, Defendant-Respondent has
7 participated in the acts and practices described in this Complaint. Defendant-
8 Respondent transacts business in this district, including through a motor vehicle
9 retail store or lot, through television, print, radio, Internet, and email
10 advertisements reaching consumers living in the district, and through the websites
11 thecargroup.com, cargroupdirect.com, and normreeveshondacerritos.com.
12 7. Defendant Cerritos Ford, Inc. (“Norm Reeves Cerritos Ford”), also
13 doing business as Norm Reeves Ford Superstore Cerritos, Norm Reeves Lincoln,
14 and Norm Reeves Hyundai Superstore, is a California corporation. The
15 corporation has retail locations at 18900 Studebaker Road, Cerritos, CA 90703 and
16 18818 Studebaker Road, Cerritos, CA 90703. The corporation’s registered address
17 is 20322 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The registered
18 agent is Janice L. Dietz. David Conant is President and Director of the
19 corporation. The Conant Family Trust holds 75% of the shares of the corporation.
20 At all times material to this Complaint, Norm Reeves Cerritos Ford has
21 participated in the acts and practices described in this Complaint. Norm Reeves
22 Cerritos Ford transacts business in this district, including through a motor vehicle
23 retail store or lot, through television, print, radio, Internet, and email
24 advertisements reaching consumers living in the district, and through the websites
25 thecargroup.com, cargroupdirect.com, normreevesford.com,
26 normreeveslincoln.com, and normreeveshyundai.com.
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 5 of 26 Page ID #:5

1 8. Defendant Cerritos Infiniti, Inc. (“Cerritos Infiniti”), also doing
2 business as Cerritos Infiniti, is a California corporation. The corporation’s
3 physical retail address is 11011 South Street, Cerritos, CA 90703. The
4 corporation’s registered address is 20322 SW Acacia Street, Suite 100, Newport
5 Beach, CA 92660. The registered agent is Janice L. Dietz. David Conant is
6 President and Director of the corporation. The Conant Family Trust holds 85% of
7 the shares of the corporation. At all times material to this Complaint, Cerritos
8 Infiniti has participated in the acts and practices described in this Complaint.
9 Cerritos Infiniti transacts business in this district, including through a motor
10 vehicle retail store or lot, through television, print, radio, Internet, and email
11 advertisements reaching consumers living in the district, and through the websites
12 thecargroup.com, cargroupdirect.com, and cerritosinfiniti.com.
13 9. Defendant Coastal Auto Sales, Inc. (“Norm Reeves Huntington
14 Beach”), also doing business as Norm Reeves Honda Superstore Huntington
15 Beach, is a California corporation. The corporation’s physical retail address is
16 19131 Beach Boulevard, Huntington Beach, CA 92648. The corporation’s
17 registered address is 20322 SW Acacia Street, Suite 100, Newport Beach, CA
18 92660. The registered agent is Janice L. Dietz. David Conant is President and
19 Director of the corporation. The Conant Family Trust holds 75% of the shares of
20 the corporation. At all times material to this Complaint, Norm Reeves Huntington
21 Beach has participated in the acts and practices described in this Complaint. Norm
22 Reeves Huntington Beach transacts business in this district, including through a
23 motor vehicle retail store or lot, through television, print, radio, Internet, and email
24 advertisements reaching consumers living in the district, and through the websites
25 thecargroup.com, cargroupdirect.com, and normreeveshuntingtonbeach.com.
26 10. Defendant Conant Automotive Resources, LLC (“the CAR Group”),
27 also doing business as Conant Auto Retail Group and the CAR Group, is a
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 6 of 26 Page ID #:6

1 California limited liability company. The company’s registered address is 20322
2 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The registered agent is
3 Janice L. Dietz. David Conant is the Chief Executive Officer of the company and
4 a member of the LLC. The CAR Group provides management services to each of
5 the other corporate defendants and advertises on their behalf. At all times material
6 to this Complaint, the CAR Group has participated in the acts and practices
7 described in this Complaint. The CAR Group transacts business in this district,
8 including through television, print, radio, Internet, and email advertisements
9 reaching consumers living in the district, and through the websites
10 thecargroup.com and cargroupdirect.com.
11 11. Defendant Conant Auto Retail, San Diego, Inc. (“Conant San
12 Diego”), also doing business as Toyota San Diego and Scion San Diego, is a
13 California corporation. The corporation’s physical retail address is 5910 Mission
14 Gorge Road, San Diego, CA 92120. The corporation’s registered address is 20322
15 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The registered agent is
16 Janice L. Dietz. David Conant is President and Director of the corporation. The
17 Conant Family Trust holds 80% of the shares of the corporation. At all times
18 material to this Complaint, Conant San Diego has participated in the acts and
19 practices described in this Complaint. Defendant transacts business in this district,
20 including through a motor vehicle retail store or lot, through television, print,
21 radio, Internet, and email advertisements reaching consumers living in the district,
22 and through the websites thecargroup.com, cargroupdirect.com,
23 scionsandiego.com, and toyotasandiego.com.
24 12. Defendant Irvine Auto Retail I, Inc. (“Norm Reeves Honda Irvine”),
25 also doing business as Norm Reeves Honda Irvine, is a California corporation.
26 The corporation’s physical retail address is 16 Auto Center Drive, Irvine, CA
27 92618. The corporation’s registered address is 20322 SW Acacia Street, Suite 100,
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 7 of 26 Page ID #:7

1 Newport Beach, CA 92660. The registered agent is Janice L. Dietz. David Conant
2 is President and the only Director of the corporation. David Conant holds 75% of
3 the shares of the corporation. At all times material to this Complaint, Norm
4 Reeves Honda Irvine has participated in the acts and practices described in this
5 Complaint. Defendant transacts business in this district, including through a motor
6 vehicle retail store or lot, through television, print, radio, Internet, and email
7 advertisements reaching consumers living in the district, and through the websites
8 thecargroup.com, cargroupdirect.com, and normreeveshondairvine.com.
9 13. Defendant Irvine Auto Retail II, Inc. (“Norm Reeves VW”), also
10 doing business as Norm Reeves Volkswagen, is a California corporation. The
11 corporation’s physical retail address is 20 Auto Center Drive, Irvine, CA 92618.
12 The corporation’s registered address is 20322 SW Acacia Street, Suite 100,
13 Newport Beach, CA 92660. The registered agent is Janice L. Dietz. David Conant
14 is President and the only Director of the corporation. David Conant holds 75% of
15 the shares of the corporation. At all times material to this Complaint, Norm
16 Reeves VW has participated in the acts and practices described in this Complaint.
17 Defendant transacts business in this district, including through a motor vehicle
18 retail store or lot, through television, print, radio, Internet, and email
19 advertisements reaching consumers living in the district, and through the websites
20 thecargroup.com, cargroupdirect.com, and normreevesvw.com.
21 14. Defendant Irvine Auto Retail III, Inc. (“Norm Reeves Buick GMC”),
22 also doing business as Norm Reeves Buick GMC during some portion of the time
23 at issue, is an active California corporation. The corporation’s physical retail
24 business was located at 14 Auto Center Drive, Irvine, CA 92618. The
25 corporation’s registered address is 20322 SW Acacia Street, Suite 100, Newport
26 Beach, CA 92660. The registered agent is Janice L. Dietz. David Conant is
27 President and the only Director of the corporation. David Conant holds 75% of the
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 8 of 26 Page ID #:8

1 shares of the corporation. At all times material to this Complaint, Norm Reeves
2 Buick GMC participated in the acts and practices described in this Complaint.
3 Norm Reeves Buick GMC transacted business in this district, including through a
4 motor vehicle retail store or lot, through television, print, radio, Internet, and email
5 advertisements reaching consumers living in the district, and through the website
6 normreevesbuickgmc.com.
7 15. Defendant Parkway Premium Motorcars, Inc. (“Norm Reeves
8 Acura”), also doing business as Norm Reeves Acura of Mission Viejo, is a
9 California corporation. The corporation’s physical retail address is 28802
10 Marguerite Parkway, Mission Viejo, CA 92692. The corporation’s registered
11 address is 20322 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The
12 registered agent is Janice L. Dietz. David Conant is President and Director of the
13 corporation. The Conant Family Trust holds 90% of the shares of the corporation.
14 At all times material to this Complaint, Norm Reeves Acura has participated in the
15 acts and practices described in this Complaint. Norm Reeves Acura transacts
16 business in this district, including through a motor vehicle retail store or lot,
17 through television, print, radio, Internet, and email advertisements reaching
18 consumers living in the district, and through the websites thecargroup.com,
19 cargroupdirect.com, and normreevesacura.com.
20 16. Defendant Port Charlotte Auto Retail, Inc. (“Port Charlotte”), also
21 doing business as Port Charlotte Honda and Port Charlotte Volkswagen, is a
22 Florida corporation. The corporation’s physical retail address is 1252 Tamiami
23 Trail, Port Charlotte, FL 33953. The corporation’s mailing address is 20322 SW
24 Acacia Street, Suite 100, Newport Beach, CA 92660. The corporation’s registered
25 address is 1252 Tamiami Trail, Port Charlotte, FL 33953. The registered agent is
26 William A. Long. David Conant is President and the only Director of the
27 corporation. The Conant Family Trust holds 90% of the shares of the corporation.
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 9 of 26 Page ID #:9

1 At all times material to this Complaint, Port Charlotte has participated in the acts
2 and practices described in this Complaint. Port Charlotte transacts business in this
3 district, including through the websites thecargroup.com, cargroupdirect.com,
4 portcharlottehonda.com, charlottevw.com, and portcharlottevw.com.
5 17. Defendant West Covina Auto Retail, Inc. (“Norm Reeves West
6 Covina”), also doing business as Norm Reeves Honda Superstore West Covina, is
7 a California corporation. The corporation’s physical retail address is 1840 East
8 Garvey Avenue South, West Covina, CA 91791. The corporation’s registered
9 address is 20322 SW Acacia Street, Suite 100, Newport Beach, CA 92660. The
10 registered agent is Janice L. Dietz. David Conant is President and Director of the
11 corporation. The Conant Family Trust holds 90% of the shares of the corporation.
12 At all times material to this Complaint, Norm Reeves West Covina has participated
13 in the acts and practices described in this Complaint. Norm Reeves West Covina
14 transacts business in this district, including through a motor vehicle retail store or
15 lot, through television, print, radio, Internet, and email advertisements reaching
16 consumers living in the district, and through the websites thecargroup.com and
17 normreeveswestcovina.com.
18 COMMERCE
19 18. At all times material to this Complaint, defendants and Defendant-
20 Respondent (collectively “Defendants”) have maintained a substantial course of
21 trade in or affecting commerce, as “commerce” is defined in Section 4 of the FTC
22 Act, 15 U.S.C. § 44.
23 Prior Commission Proceeding
24 19. In a Commission proceeding bearing Docket No. C-4436, the
25 Commission charged Defendant-Respondent with, among other things:
26 a. Making false or misleading representations that, when a
27 consumer leases a vehicle, there would be almost no money due
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Case 8:17-cv-01942 Document 1 Filed 11/03/17 Page 10 of 26 Page ID #:10

1 at lease signing when in fact security deposits and/or significant
2 fees would be due at lease signing, in violation of the FTC Act;
3 b. Disseminating consumer credit advertisements for vehicles that
4 advertised a 0% APR, but failing to disclose and/or failing to
5 disclose adequately that consumers who finance more than a
6 certain amount will be charged more than 0% APR, in violation
7 of the FTC Act;
8 c. Disseminating consumer lease advertisements for vehicles that
9 failed to disclose and/or failed to disclose clearly and
10 conspicuously terms for leasing the advertised vehicles, in
11 violation of Regulation M, 12 C.F.R. Part 213, as amended, and
12 the CLA, 15 U.S.C. §§ 1667-1667f, as amended; and
13 d. Disseminating consumer credit advertisements for vehicles that
14 failed to disclose and/or failed to disclose clearly and
15 conspicuously terms for financing the purchase of the
16 advertised vehicles, in violation of Regulation Z, 12 C.F.R. Part
17 226, as amended, and TILA, 15 U.S.C. §§ 1601-1667, as
18 amended.
19 20. On February 20, 2014, the Commission issued its Consent Order
20 approving a settlement with Defendant-Respondent. In pertinent part, Parts I-V of
21 the Consent Order state:
22 I.
23 IT IS HEREBY ORDERED that [Defendant-Respondent] and its officers,
24 agents, representatives, and employees, directly or indirectly, in connection
25 with any advertisement for the purchase, financing, or leasing of motor
26 vehicles, shall not, in any manner, expressly or by implication:
27 A. Misrepresent the cost of:
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